Facebooking your finances

Current online behaviour shows Australian consumers are still not quite ready to share their money matters

By Sandra Hanchard

December 7, 2007

Web 2.0 technologies provide an enhanced online experience for consumers in how they create and share media and personal information. Within the finance industry, websites such as Wesabe and Mint have emerged to allow consumers to centralise multiple sources of data for financial management, and to even share with other users their transactions, leveraging the power of collective knowledge.

But how ready are consumers to adopt and trust these web services that potentially offer spending efficiencies, yet at the same time pose privacy risks?

As the Internet has matured, users have become accustomed to conducting their online banking through the websites of reputable institutions. While fraudulent activity such as phishing has warranted consumer caution, online banking is now ubiquitous.

Australia’s major banks frequently rank in the top 50 of all sites tracked by Hitwise. The top 30 Internet banking websites accounted for 1.8 per cent of overall Internet visits in October; compared to 5,500 websites in the Music industry which contributed 1.02 per cent of visits. Online banking is on par, if not ahead of some website lifestyle activities, reflecting consumer confidence in transmitting personal information over the Internet.

Consumer and advertiser involvement with Web 2.0

But does this trust extend to emerging Web 2.0 properties? Looking at consumer traction in websites with integrated social networking and business functionality, it seems so. For example, LinkedIn, a business networking tool, was ranked 9th in the Hitwise Employment and Training industry in October 2007, and enjoyed 331 per cent year-on-year growth. Users appear to have been forthcoming in adding their trusted contacts to LinkedIn networks. There is a significant amount of trust placed in the technology of the website to protect information on what might be key business relationships.

Social networking website Facebook, ranked as the 7th most popular website on the Internet in October 2007, also offers similar business opportunities. Analysis in August this year indicated a substantial amount of cross-traffic between LinkedIn and Facebook. This suggests a demand for services that allow users to share data across multiple websites for both social and business purposes.

The Banks and Financial Institutions industry has also enjoyed growing traffic from social networking websites, with an increase of 198 per cent in referral traffic over the last 12 months. Facebook accounted for the highest upstream share with 1.25 per cent, followed by MySpace with 1.23 per cent. Overall, social networking websites referred 2.78 per cent in upstream traffic to the Banks and Financial Institutions industry, a reflection of significant banner advertising. Travel and Shopping & Classifieds websites however received higher referral rates of 2.79 per cent and 3.64 per cent respectively, where advertisers have been faster to catch on with newer web technologies.

Wesabe and P2P lending

While it would appear that the landscape is set for business-oriented Web 2.0 services, the uptake of websites such as Wesabe and Mint is still nascent. Wesabe ranked within the top 500 Business Information websites in the US market in October 2007, but only ranked at 947 in the UK market and 1,196 in Australia.

There is plenty of evidence however, of consumer demand for websites that offer better management of finances. For example, amongst the top search terms to the Banks & Financial Institutions industry were a number of variations on the word ‘calculators’. 

While banking websites offer several of these types of tools, other features such as the ability to search through and tag transactions, or summarise spending habits could enhance the consumer experience on an already trusted website.

Peer-to-peer lending websites such as Zopa and Prosper have gained more traction within the Banks & Financial Institutions industry in overseas markets. Zopa ranked 224 out of 3,301 domains measured in October 2007 in the UK market, while Prosper ranked 266 out of 2792 domains in the US market, moving from a position of 426 in October 2006.

The launch of iGrin in Australia represents new local borrowing and lending opportunities for consumers; the success of the service will depend on achieving a critical mass of users.

Leveraging the networks of websites such as LinkedIn or Facebook through advertising partnerships would be one strategy option for iGrin to target desirable users. 

Consumer trust and adoption

As developers work furiously to provide the next level of web services, consumers are faced with new considerations of the exposure of private data. Already there are applications such as Beacon that allow third-party websites to upload purchase information into the news feed for Facebook.

 The ability for users to opt-out of these programs will be crucial for networking websites to maintain the trust of users. Advanced behavioural targeting by advertisers on Web 2.0 websites will also need to be developed within an ethical framework – this is before consumers even think about uploading their banking transactions, utility bills and credit card purchases.

Consumers have already shown a willingness to conduct their online banking with trusted websites. While the next-wave of technology for aggregating our personal data to create applications that empower consumers appears very near; integrity and security mechanisms will need to be robust before there is mainstream adoption of Web 2.0 services in the finance sector.

Sandra Hanchard is a research analyst with Hitwise Asia Pacific.